Recessions come and go and inflation is here to stay. In your 40’s, economic ups and downs don’t affect you because you know that with about 20 years left before retirement, you’ll have plenty of earning opportunities. You change jobs, get promoted, and earn bonuses for outstanding performance. Your savings are modest but you know that they will grow, providing you with a comfortable nest egg.

But life is full of detours. What happens when you reach your late 50s and early 60s and realize that your retirement savings won’t be enough for those retirement dreams? You didn’t expect a major illness to eat up a chunk of your savings, nor did you think you’d get downsized, or that the kids would move back home because they lost their jobs.

You’re going broke, to put it mildly. What can you do? Here are five steps you can take to free up cash, save money, and increase your income.

Tip # 1: Sit down with pen, paper and calculator

First, list your assets and earnings (if you’re still working). Second, calculate your yearly expenses. Third, write your goals for retirement. For example, don’t say “travel a lot.” That’s too broad. “We want to travel twice a year to Florida and stay in hotels” is more specific than “travel a lot.” Smart goals are specific, measurable, attainable, relevant, and timed. Once you’ve completed this task, make an appointment with your financial planner.

If you don’t have a clue about personal financial planning, get help from someone who does.

Your health comes first. If you’re healthy during your retirement years and your money runs out, at least you can always find work. Some people are planning to work past retirement to make up for the shortfall in their retirement savings, but they forget to obtain that clean bill of health from their doctor. Health is wealth, remember?

Tip # 3: Tap your house as a source of income

If you own your house and the mortgage is fully paid or you’ve got only a few more mortgage payments to make, you can use the equity you’ve built in your home to secure a low interest line of credit. Ask your financial planner if you qualify for a home equity loan. Your house could free up some of that much needed cash when the time comes.

Another way to make your home work for you is to rent out an empty room. If you’ve got a spare bedroom or a basement you don’t use, this might be a good source of income.

Use this sparingly and only when you need to. It isn’t a good idea to get into the habit of using your home as a credit card. As the great recession has shown, home prices don’t always go up. If and when home values fall you could end up in an upside mortgage.

Tip # 4: Cut down on unnecessary expenses.

You’ll be surprised how much you can save just by doing away with frivolous expenses. Sometimes that means cutting things out altogether. But most of the time you don’t have to. Take entertainment for example. Enjoy going out to the movies, but hate paying high ticket prices? Sign up with Netflix, Blockbuster online, or your local library to rent DVDs instead. Avoid pay-per-view like the plague.

Don’t want give up your favorite cable TV shows? Netflix, and Hulu Plus carry a large stock of cable TV programming. Are you a sports fanatic? With ESPN 360, you can watch live sports for free as long as your Internet provider is on the approved list.

If you aren’t ready to downgrade your internet, phone or cable TV packages, you can start by eliminating some channels that you don’t really watch. Contact your providers and attempt to negotiate. Most of them are willing to negotiate if they understand that you’re prepared to walk away. Many of them have low priced plans that aren’t advertised much. Typically they’ll for a commitment e.g. extending your contract to make sure that it’s affordable for them.

What about eating out? Is it possible to eat well on a micro-budget? Deep discounts from sites like Groupon and Living Social mean that not only is it possible for you to stay in budget and still eat great, it’s also sustainable. The only downside is that you may not get discounts if you eat at the same place every week. Still, if you’re willing to try new places it’s definitely worth it.

Plan your trips in such a way that you save gas and cut down on the use of your car. Use helpful tools like MapQuest’s route planner. Use kayak to find the cheapest flights and Tripit to plan flights and longer trips.

Collect coupons and make a shopping list (smart housewives say that a shopping list helps prevent buying things you don’t need). Sites like Coupon Mom and RetailMeNot.com make clipping coupons, a breeze.

Tip # 5: Find ways to increase your income.

Starting a business, investing your money, or getting a second job are ideas that we’ve all heard about. But what if you need to start small? These ideas allow you to start small and start today.

• Become a freelancer. Freelance websites like Odesk, Elance, and Guru put you in touch with people looking to hire. If you’re a talented writer, designer, programmer, or marketer these sites can produce cash quickly, often in as little as 15 days.
• Sell used or collectible items on eBay, Craig’s List, or Amazon. You can sell used items via eBay, Amazon, overstock, and a wide variety of sites.
• Become an affiliate marketer. Affiliates refer people to businesses and they get paid when those people become customers. Many of the top Internet retailers offer affiliate programs.
• Sell homemade products. Selling homemade products on sites like at Etsy or Cafépress, is a great way to start an e-commerce business. You can build customer base, without taking the risks that come with running a traditional e-commerce store. You can start small, launching your own store when you’re ready.
• Write for money. Sites like About.com, Squidoo, HubPages, and Associated Content, trade cash for content. While the rules vary from site to site, they all reward high-quality content. Many people make a full-time living writing for content portals like the ones above.
• Write an e-book. You’re an expert at something. Create an e-book and capitalize on your expertise. You can share it on sites like Google books, Lulu.com, SlideShare, and Scribd in addition to any sites you own.
• Become a blogger. While it’s true that most bloggers don’t make much money, there are plenty of bloggers that do make money. If you’re willing to dedicate consistent, long-term effort it can be done.
• Get (free) items from Freecycle, Craigslist, or your local thrift store, and resell them for a profit (some people question whether this is ethical or not).
• Become a lender. Sites like the Lending Club and Prosper allow you to invest (loan out) your money. They do all of the grunt work to protect you from risks and can provide returns as high as 12%.

With consistent effort, it’s possible to boost income, reduce expenses, and quickly build a nest egg for retirement. From there, you can take the income you made and invest, using the power of compounding to quickly build passive income.

–Jack Vincent teaches you how to avoid the 17 pitfalls that lead to financial slavery and how to use the 23 principles that lead to wealth and prosperity. His book, The Way to Wealth Special Edition, is an updated, easy-to-read, modern day version of Benjamin Franklin’s, The Way to Wealth, originally written in 1758. His book has the practical wisdom you need to begin building wealth and gaining financial freedom! Download your copy today!